Arm China Thriving, CEO Reveals, Amid Son’s Decreased China Portfolio Diversification

You can watch David Faber’s interview with Arm CEO Rene Haas and SoftBank CEO Masayoshi Son on CNBC Pro.

In an interview with CNBC, Arm Holdings CEO Rene Haas stated that despite the geopolitical challenges in the past few years, Arm’s China subsidiary is performing well and has great potential in data center and automotive applications. This comes ahead of Arm’s Nasdaq debut on Thursday.

However, SoftBank CEO Masayoshi Son, who made a fortune through Alibaba, mentioned that SoftBank has significantly reduced its “exposure in China.”

Despite this statement, Arm still relies on Chinese customers who currently have the ability to purchase their semiconductor technology and designs. Neither Arm nor SoftBank directly control their China subsidiaries. SoftBank sold a controlling stake in the China business to Chinese investors in 2018. Although Arm now only owns about 5% of Arm China, the group still contributes to almost a quarter of Arm’s fiscal 2023 revenue.

This relationship may face additional pressure in the near future due to stringent export controls implemented by the Biden administration on high-powered semiconductors. These restrictions have already affected Intel and Nvidia, and while Arm doesn’t manufacture its own chips, it sells designs to many chip companies.

The Biden administration has also imposed new outbound investment restrictions on key technology sectors.

SoftBank’s focus has been on reducing its stake in Alibaba, which has been happening gradually over the past few years. SoftBank’s reduced exposure may have more to do with its own portfolios, as the company has experienced significant losses on its Vision Fund I and II. However, Vision Fund I is now profitable. Additionally, SoftBank’s nonpublic portfolio includes the popular app TikTok, which has faced scrutiny from the U.S. government regarding its data collection practices.